The Pharmaceutical/Life Sciences Industries are undergoing a profound change. As the business goes more towards a bottom line management focus, savings from consulting, outsourcing (globalization) and outside technical services become more important. This Blog is focused on serving the interests of those industry clients, investors and their suppliers. We will discuss issues related to the politics, finance and technology and their impact on the industry.

Sunday, August 29, 2010

As our readers may recall, I’ve begun a journey across the Internet looking for evidence from Big Pharma that there really is a good story out there for them and that they’re just going through a slump right now like everyone else. Well, imagine my chagrin when I found myself back at where I first started, Pharmaceutical Research and Manufacturers of America (PhRMA) (http://www.phrma.org/ ), one of Big Pharma’s lobbying groups.

Now, here’s where it starts to get interesting. ABC asked for an interview with PhRMA and was refused. Submitted written questions were ignored. But, PhRMA did issue a statement, and I’m quoting directly from ABC here, “called the AARP report "distorted and misleading" for not including cheaper generic equivalents which account for 75 percent of prescriptions filled.” Did you get that? Big Pharma’s lobbyists are taking credit for lower drug prices because of generics! You can’t make this stuff up.

I went to PhRMA’s website to see this for myself (http://www.phrma.org/news/news/phrma_statement_aarp_report ). One thing I want to do is to thank ABC for clarifying PhRMA’s statements because I had to read it about half a dozen times before I understood what they were trying to say. The report even claims that increases for drugs were the lowest since 1961. I didn’t go back and check their sources and I can only speak anecdotally about what I hear going on around me with family and friends and I have a hard time with that.

This is where I start to question the long term viability of Big Pharma as well as their ability to get out of their own way. I’ve blogged before about the threat of generics to Big Pharma’s brand name drugs. Check on Google and you’ll find many links to this topic. This was a factor in Big Pharma’s future even before there was a World Wide Web. Now, when their backs are to the wall, they justify themselves by citing the lower prices of generics. Are we seeing a shift here? Is Big Pharma moving to a commodity type model? Might we see more consolidation in the pharmaceutical industry? Could possibly Big Pharma not realize this themselves? Follow my journey for the next several weeks and we’ll see.

As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.

Monday, August 23, 2010

We have been informed that the blog "Pharmatching" based in Germany had selected our blog included on their “Best Pharma Websites List”, the 10 top sites in their opinion. This marks the second time in two years where our blog has been cited as among the best in the world - we are truly humbled. The entire list can be seen at https://www.pharmatching.com/blog/2010/08/the-best-pharma-life-sciences-biotech-websites-part-1/ . Pharmatching wrote of us: This Blog discusses issues related to the politics, finance and technology and their impact on the industry. Always great thoughts and interesting views. We would like to thank both Pharmatching and you, our readers, for following us and letting us know that we’re adding some value. Additionally, much of the credit for the high quality of our blog is due to my colleague, Guy de Lastin. Guy has continued to provide thought provoking, well researched articles that have attracted many to our blog.

We’ll continue to write about Big Pharma and the challenges that the entire life sciences sector faces. Stay tuned as we go out onto the Web to see what Big Pharma is actually saying about themselves in our next series of blogs.

I found another site without content, at least relevant to an explanation of how an industry will grow out of its slump. The site is busy with all the de rigueur flash for a modern website. Although, I didn’t see Twitter, Facebook, or any other social media application. (But, I’ll bet they’ll be there soon.)

Like PhRMA’s site, there’s a lot going on but no general theme. One link looks suspiciously like a paid advertisement. Overall, this site reminds me of the saying that a horse is a camel designed by committee. There’s something for everyone. The prerequisite “green” sections are even there but don’t seem to tie together.

This is what I think is wrong with Big Pharma today. There is no direction. Everything is reactive, trying to please whomever the particular gods of the moment happen to be. Let’s hope they don’t get the idea that human sacrifice is needed. Nope, sorry, it’s been done. Just look at the layoffs of all the talent from many major pharmaceutical companies over the past several years. They’ll soon find that their best and brightest have been sacrificed to false gods as others have found throughout history.

I’m starting on a journey with this series of blogs. I’ll be traveling around the Web looking for Big Pharma’s story in its own words. But I want to get past the publicists’ hype. If you read the blurbs coming out of the executive suites, everything is fine. Pipelines are strong, healthcare reform is a non-issue, and on and on. I’m reminded of what IBM dispensed from Armonk when John Akers was still in charge.

My trip will go past the type of sites that I’ve been to lately. I’ll be looking for the real story because I know it’s there. Big Pharma is an industry in a state of flux as this blog has been reiterating since its inception. I believe that time is running out for Big Pharma. They’re going to hit the proverbial “tipping point”. Yes, the coffers are still full of cash, but revenue is beginning to sputter, and while cost cutting can keep the bottom line looking healthy for a while even a first year investment analyst knows that game gets played out eventually.

So, keep an eye on this blog as I go in search of Big Pharma’s future.

As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.

Sunday, August 15, 2010

For those of you who have been following my blogs (and Larry and I are grateful to all of you, feel free to refer us to your friends), you know that I talk about “Big Pharma” a lot. Sometimes I think I get a little carried away and give folks the impression that Big Pharma is a group of people who get together in Starbucks for a latte every once and again.

I’m not sure anyone has an exact definition of who or what is in Big Pharma and it’s probably a lot like the one for art – I’ll know it when I see it.

So, I went looking for Big Pharma. Who knows, I thought to myself, maybe I’ll end up with a latte.

Stopping at one of my favorite Web research tools, Wikipedia (http://www.wikipedia.org/ ), to see what I could find I went looking for this nebulous group. Well, it turns out that there’s an entry and I’m happy to say Big Pharma is alive and well if not drinking lattes. Interestingly, keying in “Big Pharma” in the Wikipedia search field yields, drum roll please, the “pharmaceutical lobby.” I have to admit that for the all the advertising money that Big Pharma spends they’re really ought to look for some better talent if this is the best that they can get for their money. (Larry, maybe you should think about coming out of retirement, there’s money to be made here.)

According to Wikipedia, the top twenty pharmaceutical companies are represented by two trade groups, an expensive way of saying lobbyists. Being the wanderer that I am, I visited one of these trade groups’ websites. I selected Pharmaceutical Research and Manufacturers of America (PhRMA) (http://www.phrma.org/ ). I must admit I was somewhat underwhelmed. Here’s why.

The site has all the requisite bells and whistles that are expected these days, Twitter, RSS syndication, electronic newsletters, even Facebook. What I couldn’t find a lot of was content. Oh, sure, there were many words. But, I couldn’t escape the sense that this was a very defensive site. (Spoiler alert – here’s where I go into my spiel about Big Pharma going away.)

PhRMA’s mission statement on the site says their goal is “is to conduct effective advocacy for public policies that encourage discovery of important new medicines for patients by pharmaceutical/biotechnology research companies.” What does that mean? Seriously, I’m not playing dumb here. I feel that they are trying to be all things to all people with this site.

If Big Pharma is really introducing new products and driving for revenue growth then why all the self justification? Does Big Pharma know something that we don’t?

Tune in next week for the next installment of my blog.

As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.

Saturday, August 14, 2010

If you’ve been following my blogs lately then you know that I’ve announced the end of Big Pharma as we know it and since I’ve been trying to prove it. When I started this series, I thought that this might prove controversial but as I’ve been researching and blogging, I’ve come to realize that I’m probably not alone here.

Another point that I’m realizing is that some of these warning signs have been around for awhile. Maybe not with billboards and newspaper advertisements but the signs are there if you look closely enough. (Larry does say that I have too much time on my hands.)

For example, while researching, a fancy way of saying surfing the Net, I came across a report on the Federal Trade Commission’s (FTC’s) website (http://www.ftc.gov/reports/pharmaceutical/drugexsum.shtm ) entitled The Pharmaceutical Industry: A Discussion of Competitive and AntitrustIssues in an Environment of Change. The report is dated June 25, 2007 and is meant to address possible antitrust practices but I believe is a clue to how Big Pharma’s practices will work against it in the long term. Also, note that this is over two years before healthcare reform legislation was passed and even before most people even thought that Barack Obama had a chance of becoming President of the United States.

The report notes four changes in the pharmaceutical industry and discusses them from an antitrust perspective. I don’t wish to blog about that but what these changes mean to an industry that’s going through a period of elimination and consolidation.

First, the report notes that information technology is becoming a driver of competitive advantage for drug companies. My take is that early innovators who can make the big investments here will pull ahead of their competitors.

Second, the authors make the point that pharmaceutical companies could then segment their pricing strategies to different categories of users because of this technology. Here’s where I feel that since these buyers will be either the government or medical insurance providers that this will work against the drug companies. As I’ve blogged before many times, the drug companies can’t squeeze their suppliers and employees for cost reductions without the same ultimately happening to them. What goes around comes around.

The final two points discuss the antitrust implications of vertical and horizontal consolidations. These points are indications of an industry going through shake-out and consolidation. There’s no rocket science here. Go back to the nineteenth century when the first trusts were being established in the railroad and oil industries to see some of the first examples.

These points are interesting and I’m not the report’s authors thought about it the way that I am. But, I feel my points are valid. Please check the report out for yourself and let me know your thoughts.

As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.

Saturday, August 7, 2010

OK, last week, I announced the end of Big Pharma. CNBC and the Wall Street Journal haven’t called me yet. (And, if they ever do, you’ll know that it’s been really slow week in the markets.) I suspect that many of my readers (you’re out there somewhere) probably dismissed me as either a crank or a sensationalist. But, for that faithful minority who have kept the faith, I can say that there is a method to my madness. In this blog, I’ll write about some of my reasons for taking this position.

First, I’d like to return to GlaxoSmithKline’s problems with Avandia. Shelley DuBois has written an interesting article about this at CNNMoney.com (http://money.cnn.com/2010/07/13/news/companies/avandia_fda_panel.fortune/index.htm ). In particular, she raises the point of what does it mean for future drug investments if after eight (8) years on the market a drug can be pulled by the FDA, not to mention the potential for litigation. This is important because it hits right at the heart of today’s drug business – making money. If a reliable cash flow can’t be forecast, investors will seek a higher return to offset the risk. However, potential returns aren’t infinite. I make the point to reinforce that business as usual is over for the pharmaceutical companies.

Next, here’s another interesting blog (http://www.alternet.org/story/146471/8_invented_diseases_big_pharma_is_banking_on ) by Martha Rosenberg at AlterNet.com. She has two points that in particular stand out for me. She notes the move of Big Pharma away from its current big molecules to vaccines and biologics and the resistance being encountered from the anti-vaccine movement and how it may be returning to inventing new diseases for the drugs that it’s just happened to have developed. Martha then proceeds to list and describe eight new diseases that we may soon see being advertised on television soon. ( I also like how Martha snuck in the fact that a former CDC director, Julie Gerberding, is now the president of Merck vaccines.)

I’m using these two sources to substantiate my case that Big Pharma’s revenue model is dead and future growth will be unsustainable. If greater risks without offsetting higher returns are to be the future then new private sponsorship of drug development will wither away. Healthcare reform will act as a ceiling to potential returns.

Healthcare reform will also act as a brake, or at least introduce uncertainty, into “new” diseases being introduced for reimbursement anytime soon. A move to prevention as opposed to treatment on the part of the public could cause new drugs to be less successful upon introduction than in the past.

In closing, I see much turmoil ahead for pharmaceutical companies. Let’s watch earnings announcements over the next several years and see what happens.

As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.